Payment banks will not eat up large lenders' business, report suggests


Ratings agency Crisil said the upcoming payment banks (PBs) will largely focus on the underbanked areas like the East, Northeast and Central regions, and the existing lenders should not worry about them.

"We do not expect them to significantly dent the business of existing banks given that their services would largely focus on the underbanked areas," its chief analytical officer Pawan Agrawal said in a note two days after the Reserve Bank issued licences to 11 such players.

The agency added that existing banks stand to benefit out of a partnership with a PB through increased access to unbanked and underbanked areas in a cost-efficient manner. Citing its proprietary data, which point to under penetration, the agency said pockets in the East, Northeast and the Central regions stand to gain the most from the new banks.

In one more step towards the era of differentiated banking or having specialised banks, the RBI had on Wednesday accorded in-principle approvals to 11 out 41 aspirants to start PBs, including entities led by industrialists Mukesh Ambani, Kumarmangalam Birla, Sunil Mittal and Dilip Shanghvi, Anand Mahindra among others apart from the Department of Posts.

Higher volume of transactions, nimble but technologically superior cost structure and ability to generate fee income will be the key points for the business model of a PB, the agency said. Fees from domestic remittances, spread on savings deposits, fees from acting as business correspondents and transaction fees through e-commerce and debit card usage are the specific revenue streams, it said.

"Even if payments banks are able to gather around 10 per cent of rural savings deposits from areas that have banks, and from unbanked areas served by chit funds and other non-banking channels, the opportunity to attract savings deposits will be in excess of Rs 1 trillion over the next five years," its business head,large corporates, Raman Uberoi said.

The commentary comes even as the largest lender State Bank has flagged concerns over the entry of PBs, which had to be quickly allayed by the Reserve Bank Governor Raghuram Rajan.

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